XAU/USD Price Forecast
- The Gold price benefits from the US midterm election’s uncertainty
- Bullish signals on the gold daily price chart
The US Dollar price pointed lower on Friday after the job data revealed an increase in unemployment rates from 3.5% in September to 3.7% in October. Markets think that this increase could bring the US central bank closer to easing given its focus on reducing the labor market’s demand which feeds inflation.
Opinion polls in the US midterm elections suggested that republicans could win the majority in both congress chambers, which weighed on the US dollar price. However, the primary results showed a different picture as Democrats have performed slightly better than expected hence, they may keep their majority in the Senate and lose it in the House of Representatives. It should be noted that stock and bond traders prefer Republicans to win the majority in both the US congress houses, while the US Dollar bulls prefer Democrats to control both chambers. The gold price edged higher recently as investors preferred the safety of the precious metal over the US dollar due to the uncertainty caused by the midterm elections.
On Thursday, the gold traders’ focus will be on the US CPI report (inflation) of October. Inflation rates in the US hit a 40-year high at 9.1% in June and since then the Fed started an ultra-tight monetary policy hiking the rate by 75bp in every meeting. This led inflation levels to decelerate however, remained over 8%. Markets expect the inflation headline to retreat from 8.2% in September to 8% in October, and the core inflation rate to fall to 6.5% hence, any higher-than-expected read, especially on the core inflation side, would increase the odds of another 75bp rate hike in December.
Gold Daily Price Chart
ThinkTrader Chart Source
On November 4, the gold price rallied and closed above the 50-day simple moving average as some traders exited some of their short positions. It should be noted that the price develops a double bottom pattern where the neckline is located at 1730 hence, the gold rate could rally towards 1840
should the price break and remain above the neckline level.
Currently, the gold price moves in the trading zone between 1685 – 1765 and could be heading for a test of its high end. A further daily close above 1765 may encourage bulls to push the price even higher towards 1807. On the other hand, a daily close below the low end of the zone at 1685 opens the door for bears to press the gold rate even lower towards 1629 although, the support levels at 1661 and 1645 should be watched closely.
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